November 08, 2005
Free money
I was surprised to see the participation statistics about 401(k) retirement plans. Less than half of eligible employees participate and less than 10% contribute the maximum allowed ($14,000 for 2005) by the law. Even if you can't contribute the maximum, you should try to put in enough to get the employer's match. If you are not contributing enough to capture all of your employer's matching contribution, you are throwing away free money.
Posted by Parag at November 8, 2005 03:11 PM
Parag,
Not all employers match contribution to 401(K). It can range from 0% to 100%.
Posted by: mahesh at November 8, 2005 08:06 PMMahesh: Most employers (all fortune 500) do match the employee's contribution to certain extent. Even without the match, up-front tax savings and power of compounding make 401(k) plans very attractive. Many employers are switching to an automatic 401(k). All new employees are signed up in the plan. They have to take action to opt out. Personal debt to savings ratio is abysmal in US. People should save more and 401(k) is a good place to park a chunk of it.
Posted by: Parag at November 9, 2005 06:08 AM